There is something different being carried on the fresh island breeze of the Dominican Republic these days: optimism. The sense of hopefulness is palpable – perhaps nowhere more so than in the tourism industry.

The new government of president Leonel Fernandez is making an effort to diversify the national economy and is seeking FDI in such varied sectors as international services, manufacturing, agroindustry and infrastructure development. But the tourism sector remains the lynchpin, and it is poised for growth.

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The Caribbean country was later than some of its neighbours in recognising the full economic potential of its white sandy beaches and crystal blue waters; there was no dedicated ministry for tourism until 1979.

Victor Cabral, who served as the first tourism minister and is now chief operating officer of Cap Cana, an upscale resort community in Punta Cana, set about bringing more professionalism to the Dominican tourism industry and putting useful rules and regulations on the statute books.

Legislative detonator

One piece of legislation in particular, Law 158, opened up the sector to foreign investment and set the stage for growth. “That was a tremendous detonator for tourism here,” says Mr Cabral. “Tourism changed from a second class to a first class citizen in the Dominican Republic’s economy.”

In the 25 years since then, capacity has grown from 3000 hotel rooms to 56,000 rooms. Felix Jimenez, the new minister of tourism, says that by the end of this year there will be 60,000. That is all thanks to Law 158, according to Mr Cabral. “It has been a tremendous tool for investment in the Dominican Republic,” he says. “Most other islands have what we have; the difference is this law.”

The government is spending $20m on an international marketing campaign to attract tourists from around the world and pumping pesos into tourism-related infrastructure. As far as Mr Cabral is concerned, it is money well spent. “The only sector of the economy that, with encouragement, can produce in three to four years a dramatic increase in foreign exchange is tourism,” he says. “We now get $3bn in foreign exchange, but probably by the end of this administration we could get $4bn-$5bn just because of Samana.”

Assets put to use

The Samana peninsula, located in the north-east, and nearby islands of Las Terranas, El Portillo and Cayo Levantado are primarily known for eco-tourism, secluded beaches and whale-watching. But the area is being built up, with up to 5000 new hotel rooms expected in the next few years. Getting to Samana will soon be much easier than it was, thanks to the opening next year of an international airport receiving direct flights from the US. The Dominican Republic is already well served by seven international airports – an impressive number for such a small country.

Across the island, Mr Jimenez wants to develop the south-west, which is one of the poorest but also most scenic parts of the island. “There are no hotels, no infrastructure, nothing but beautiful beaches,” he says.

But there may soon be new hotels: a mission from the World Tourism Organisation plans to look at the area and help to think of ideas for developing it. The minister hopes to have a plan drawn up by the middle of this year and the first batch of new hotels open by the winter of 2006. He says several chain-hotel investors have scouted out the area.

New investment

The first big investment by a Mexican chain has been secured in the form of a 180,000-room complex and a convention centre being built by Palace Resorts in Punta Cana. Most investment in the Dominican tourism sector has been local and European, but US firms are showing interest: Westin is spending $123m – the country’s first large tourism investment by a US company.

The Westin investment is also significant because it signals a push for more frequent independent traveller business to compliment the more established all-inclusive segment.

Big spenders

Americans should remain the biggest spenders on tourism in the Dominican Republic. According to a recent study by travel agency network Carson Wagonlit, the US will spend $600bn on tourism in 2005, a 5.3% rise in the past year. From January to August 2004, travellers from the US accounted for nearly 30% of total foreign arrivals by air. During that time, more than 300,000 US tourists visited, up 8.7% from the same period in 2003.

Tourists also arrive from the US and elsewhere by boat. “We are a union point between east and west and are located in the centre of the Caribbean,” says Mr Jimenez. This makes the island a convenient port of call for cruise-liners, sailing boats and yachts. Marinas are being built and ports upgraded to cater to this burgeoning business. Samana, for example, receives one or two cruise-liners a week but in the coming cruise season five or six are expected to arrive every week.

Luxury resorts

The country is also moving up the value chain to the high-end tourism sector. Developments such as Cap Cana and Atlantica – another upscale resort community under construction in Luperon Bay on the northern tip of the island – are aimed at the yacht-owning crowd. And boutique luxury resorts are springing up around the island – like Puerta Plata’s Casa Colonial Beach & Spa.

Puerta Plata itself, the country’s traditional tourist hub, is undergoing a revival. It is broadening its appeal with new attractions such as Ocean World, a marine park, and luring tourists out of their resorts with a beachfront marketplace, El Pueblito, and a proposed network of pedestrian walkways.

Revitalisation projects, major investments and green-field developments of all these various types are being carried out now across the island, suggesting a new seriousness about becoming a major player in the Caribbean tourism market.

“With proper co-ordination and imagination, I don’t see why the Dominican Republic cannot become something extraordinary in tourism,” says Mr Cabral. There is every reason why it should.